Bank of Hawaii (BOH)

Regional banking institution Bank of Hawaii (NYSE:BOH) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 12.2% year on year to $182.6 million. Its GAAP profit of $1.20 per share was 4% above analysts’ consensus estimates.

Company Overview

Founded in 1897 as a financial anchor for the newly annexed Hawaiian territory, Bank of Hawaii (NYSE:BOH) is a financial institution providing banking, investment, and insurance services primarily to customers in Hawaii, Guam, and other Pacific Islands.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Bank of Hawaii's competitors include other regional banks operating in the Pacific Islands such as First Hawaiian Bank (NASDAQ: FHB), Central Pacific Financial (NYSE: CPF), and American Savings Bank, as well as national banks with presence in the region like Wells Fargo (NYSE: WFC) and Bank of America (NYSE: BAC).

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Unfortunately, Bank of Hawaii struggled to consistently increase demand as its $691.6 million of revenue for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a sign of lacking business quality.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Just like its five-year trend, Bank of Hawaii’s revenue over the last two years was flat, suggesting it is in a slump. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Bank of Hawaii reported year-on-year revenue growth of 12.2%, and its $182.6 million of revenue exceeded Wall Street’s estimates by 1.8%.

Net interest income made up 70.8% of the company’s total revenue during the last five years, meaning lending operations are Bank of Hawaii’s largest source of revenue.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Bank of Hawaii’s EPS was flat over the last five years, just like its revenue. This performance was underwhelming across the board.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Bank of Hawaii’s two-year annual EPS declines of 9% were subpar and lower than its flat revenue.

We can take a deeper look into Bank of Hawaii’s earnings to better understand the drivers of its performance. A two-year view shows Bank of Hawaii has diluted its shareholders, growing its share count by 1.4%. This has led to lower per share earnings. Taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, Bank of Hawaii reported EPS of $1.20, up from $0.93 in the same quarter last year. This print beat analysts’ estimates by 4%. Over the next 12 months, Wall Street expects Bank of Hawaii’s full-year EPS of $4.08 to grow 20.4%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

When analyzing banks, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value by removing intangible assets of debatable liquidation worth. EPS can become murky due to acquisition impacts or accounting flexibility around loan provisions, and TBVPS resists financial engineering manipulation.

Bank of Hawaii’s TBVPS grew at a sluggish 1.4% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 10.8% annually over the last two years from $28.99 to $35.56 per share.

Over the next 12 months, Consensus estimates call for Bank of Hawaii’s TBVPS to grow by 7% to $38.05, mediocre growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Bank of Hawaii has averaged a Tier 1 capital ratio of 11.6%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Bank of Hawaii has averaged an ROE of 13.5%, excellent for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for Bank of Hawaii.

It was encouraging to see Bank of Hawaii beat analysts’ revenue expectations this quarter. We were also happy its tangible book value per share narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 1.7% to $65 immediately after reporting.

Updated: December 4, 2025 at 11:36 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

We see the value of companies driving economic growth, but in the case of Bank of Hawaii, we’re out. To begin with, its revenue growth was weak over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders. On top of that, its net interest margin limits its operating profit potential compared to other banks that can earn more, all else equal..

Bank of Hawaii’s P/B ratio based on the next 12 months is 1.8x. This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $72.67 on the company (compared to the current share price of $66.62).